Commitment Options

Overview

PennyMac offers a competitive suite of commitment options for correspondents to sell Mortgage Loans, including Best Efforts, Bulk, Assignment of Trade (AOT) and Direct Trade (DT).

Best Efforts Commitment Option

The Best Efforts commitment option offers correspondents the ability to lock in a competitive price for a single Mortgage Loan, for a specific property and borrower(s), without incurring borrower-driven fallout risk.

Fallout occurs with respect to a Best Efforts commitment when a correspondent cancels a commitment, when the commitment delivery due date lapses prior to the delivery of the Mortgage Loan to PennyMac, or when PennyMac rejects a Mortgage Loan due to failure to meet PennyMac guidelines or commitment terms.

If a Mortgage Loan closes, the respective commitment becomes a mandatory-delivery commitment and is subject to the pair-off policy. Please refer to Commitment Cancellation, and Pair-Off.

PennyMac recognizes exceptional circumstances and may waive the pair-off fee, at its sole discretion. For example, if a correspondent locks a Best Efforts commitment and subsequently determines the Mortgage Loan does not meet PennyMac eligibility requirements, or PennyMac rejects a delivered loan due to a guideline violation, PennyMac may elect to waive the pair-off fee if the client has not exhibited a systematic trend of locking loans outside of guidelines.

Note: Each Best Efforts commitment (i.e., lock, and relock, if applicable) counts toward a correspondent’s fallout ratio. PennyMac actively monitors fallout and may suspend or terminate a correspondent’s selling privilege if excessive fallout occurs.

The total price for each Mortgage Loan is comprised of the base price, loan-level price adjustment(s), and servicing release premium, each as noted on the applicable rate sheet. Each Mortgage Loan is subject to applicable fees in effect as of the commitment lock date/time, or as otherwise noted in the Guide.

Mandatory Commitment Option

The Mandatory commitment option offers correspondents a variety of methods to optimize price and delivery of one or more Mortgage Loans. PennyMac offers, with prior approval, the following mandatory commitment types: Bulk, Assignment of Trade (AOT), and Direct Trade (DT). Please refer to Seller Eligibility for approval criteria.

Correspondents may not simultaneously utilize either AOT or DT commitments with Bulk or Best Efforts commitments for the same Mortgage Loan product. Correspondents may simultaneously utilize AOT and DT commitments for the same Mortgage Loan product.

Mortgage Loans previously locked in a Best Efforts commitment may not be allocated or delivered into a Bulk commitment unless such commitment was locked greater than sixty (60) calendar days after the earlier of the Best Efforts cancellation date or most recent commitment delivery due date.

Mortgage Loans previously locked in a Best Efforts commitment may not be allocated or delivered into an AOT or DT commitment without prior approval from PennyMac.

Failure to deliver into a mandatory-delivery commitment may result in a pair-off fee. Please refer to Commitment Cancellation and Pair-Off.

Bulk Commitment

Correspondents may execute Bulk commitments providing customization of product, interest rate range, and commitment period, as deemed suitable by PennyMac at commitment lock, for a specified set of Mortgage Loans that fit both the commitment terms and PennyMac’s broader Mortgage Loan guidelines as noted in the Guide.

PennyMac requires correspondents to submit a spreadsheet of loan-level attributes, as required by PennyMac, in order to model and offer strategic pricing for the pool of Mortgage Loans. PennyMac commingles the final set of Mortgage Loans into a single commitment.

The total price for each Mortgage Loan is an all-in value, comprised of base price, loan-level price adjustment(s), and service release premium (as noted by PennyMac and agreed upon by correspondent at commitment lock). Each Mortgage Loan is subject to applicable fees in effect as of the commitment lock date/time, or as otherwise noted in the Guide.

Assignment of Trade (AOT) Commitment

Correspondents may execute AOT commitments for one or more trade assignments comprised of a single security type, security coupon, security settlement date, security maturity term, and pool prefix, offered by PennyMac on the assignment date, as noted on the applicable rate sheet, the Guide, Exhibit 2, or Exhibit 3 herein, for an unspecified set of Mortgage Loans that fit both the commitment terms and PennyMac’s broader Mortgage Loan guidelines as noted in the Guide.

PennyMac must review and approve each trade assignment.

Correspondents must utilize the Trade Assignment Agreement located on the Securities Industry and Financial Markets Association (SIFMA) website. PennyMac will not accept trade assignments on any other document.

Each trade assignment agreement must be submitted to PennyMac, and the terms of the trade confirmed with all parties by the close of business on the second business day following the assignment date. PennyMac reserves the right to cancel any assignment for which the assigned trade’s terms cannot be confirmed within this interval.

PennyMac will not purchase any Mortgage Loan in a commitment until each trade assignment agreement associated with such commitment agreement is executed.

PennyMac may delay execution of the trade assignment agreement until at least fifty percent (50%) of a commitment, by Mortgage Loan amount balance, has been delivered.

Each trade assignment must have a minimum assigned amount greater than or equal to one million dollars ($1,000,000).

Correspondents must fully deliver a commitment within fourteen (14) calendar days of assignment. If a portion of the commitment remains undelivered after such timeframe, PennyMac may adjust the note rate adjusters on the undelivered portion to a worse-of price, equal to the lesser of the adjusters in effect as of the assignment date/time and the delivery date/time of the remaining loan(s) to be delivered.

Mortgage Loans delivered into AOT commitments must meet pooling eligibility requirements for the applicable security, including, but not limited to, high balance limits and homogeneity.

The total price for each Mortgage Loan is comprised of the base price (as noted by the trade price of a single trade assignment, or the weighted average price of a multiple trade assignment), note rate adjusters, loan-level price adjustments, servicing release premium, interest carry, and fees. Each Mortgage Loan is subject to the above-mentioned adjustments and fees (excluding base price) as noted on the applicable rate sheet in effect as of commitment assignment date/time, or as otherwise noted in the Guide.

Interest carry is calculated using each Mortgage Loan’s interest carry days, defined as the difference between the file delivery date and the security settlement date of the assigned trade.

Note: PennyMac shall have no obligation to deliver any Mortgage Loan purchased from a correspondent to a trade assigned by such correspondent. PennyMac is free to pair off, reassign, or to make any other disposition of the assigned trade at its sole discretion.

Direct Trade (DT) Commitment

Correspondents may execute DT commitments for a single security type, security coupon, security settlement date, security maturity term, and pool prefix, offered by PennyMac on the commitment lock date, as noted on the applicable rate sheet, the Guide, Exhibit 2, or Exhibit 3 herein, for an unspecified set of Mortgage Loans that fit both the commitment terms and PennyMac’s broader Mortgage Loan guidelines as noted in the Guide.

Correspondents must fully deliver a commitment within thirty (30) calendar days of assignment. If a portion of the commitment remains undelivered after such timeframe, PennyMac may adjust the note rate adjusters on the undelivered portion to a worse-of price, equal to the lesser of the adjusters in effect as of the assignment date/time and the delivery date/time of the remaining loan(s) to be delivered.

Mortgage Loans delivered into DT commitments must meet pooling eligibility requirements for the applicable security, including, but not limited to, high balance Mortgage Loan amount limits and homogeneity.

The total price for each Mortgage Loan is comprised of the base price (i.e., bid-side security price, as noted by PennyMac at commitment lock date/time), note rate adjusters, loan-level price adjustments, servicing release premium, interest carry, and fees. Each Mortgage Loan is subject to the above-mentioned adjustments and fees (excluding base price) as noted on the applicable rate sheet in effect as of the commitment lock date/time, or as otherwise noted in the Guide.

Interest carry is defined as the difference between the Mortgage Loan’s delivery date and the security settlement date of the respective commitment’s security.